Back to FutureGen: Sierra Club Challenges California CCS Project Cited in NSPS
Carbon capture and sequestration (CCS) projects funded by the U.S. Department of Energy (“DOE”) continue take one blow after another. Last month, the DOE revoked funding for a FutureGen program carbon capture and sequestration project in Illinois, effectively killing the project. Now, a second FutreGen program CSS project has come under attack, this time from the Sierra Club and local resident associations. On March 3, 2015, the Sierra Club filed a motion to terminate the California Energy Commission’s (CEC) certification proceeding for the Hydrogen Energy California (HECA) coal-fired power plant. HECA is a proposed integrated gasification combined cycle (IGCC) power plant that would convert coal and petroleum coke, a by-product of the oil refining process, into hydrogen energy, and would also produce fertilizer.
HECA is located in Kern County, California, outside of Bakersfield. The proposed project would generate approximately 300 MW of electricity and produce up to one million tons of fertilizer per year. The site for the proposed IGCC plant is also located in close proximity to the Elk Hills Oil Field, where project proponents hope that CO2 from the syngas vents of the plant can but used for enhanced oil recovery (EOR) operations.
IGCC plants convert feedstocks into hydrogen-rich synthetic gas. HECA’s design involves further cleaning and processing the synthetic gas using an acid gas removal system to separate out CO2 from the gas stream. The facility is projected to capture up to 90% of CO2 emissions, or approximately 2.7 million tons per year. Of that amount, plans are to use 0.3 million tons of CO2 per year for fertilizer production and route the remaining 2.4 million tons to a pipeline for EOR. The current plan is for HECA to commence operations sometime in 2017, with carbon capture beginning in 2019. To date, HECA has been unable to contract with a third party for its CO2 emissions.
The total cost for HECA is projected to exceed $4 billion. The DOE has committed $408 million to the project, a portion of which was issued pursuant to the FutureGen progam. DOE has not yet pulled its support from HECA, but certain Department officials have recently commented that HECA could share the same fate as the FutureGen project in Illinois because DOE FutureGen loans require that all the money from the loan be spent by September 2015.
Sierra Club Challenge
The CEC is the lead California state agency under the California Environmental Quality Act (CEQA) for analyzing the environmental impacts of proposed energy projects. CEQA is a very burdensome state environmental review statute. The CEC has adopted a “certified regulatory program,” under CEQA that provides for an environmental analysis of the project, including an analysis of alternatives and mitigation measures to minimize any significant adverse effect the project may have on the environment, rather than the completion of a full environmental impact report under CEQA. To meets its CEQA obligations, the CEC must certify HECA before the project can proceed.
The Sierra Club’s motion to terminate HECA’s application for certification with the CEC alleges that HECA has failed to “pursue the [project] application with due diligence” as required by applicable regulations. The Sierra Club asserts that, without a CO2 contract, the project is legally and financially infeasible. CEC staff requested information on negotiations related to HECA securing a CO2 contract 18 months ago, but to date, has not received a response. Sierra Club cites HECA’s lack of response and because HECA has failed to secure a contract to sell CO2 from the facility for EOR use in the Elk Hills field as evidence that it has not pursued its application with the CEC with appropriate due diligence.
The motion also states that HECA must have an agreement in place to capture CO2 from the IGCC plant in order to meet state and federal greenhouse gas (GHG) emission requirements. The motion further contends that a CO2 sale contract is necessary for the project to receive “essential federal funding” and that “CO2 sales revenue is a necessary component of the project’s financial viability.”
If HECA Goes Under, What Happens to the NSPS?
Whether or not the Sierra Club’s motion succeeds, the threat of the loss of DOE funding still hangs over HECA’s head. If HECA also dies, the U.S. Environmental Protection Agency (EPA) will find itself on increasingly unstable legal ground with respect to recent GHG rulemakings. As with the Illinois project, EPA cited to HECA in its soon to be finalized New Source Performance Standards (NSPS) for greenhouse gas emissions from fossil fuel-fired power plants as evidence that CCS represents the best system of emission reduction (BSER) for GHG emissions. The federal Clean Air Act requires that a technology must be “adequately demonstrated” for it to qualify as BSER.
Case law provides EPA with some leeway to select an emerging technology as BSER (see Sierra Club v. Costle, 657 F.2d 298, 341, fn. 157 (D.C. Cir. 1981)), but the death of another CCS project before it even commences operation raises serious concerns about the data and reasoning EPA relied in its rulemaking. Putting aside a plain language interpretation of what it means for a technology to be “adequately demonstrated,” BSER determinations must also take into account the cost of achieving emissions reductions, and also the non-air quality health and environmental impacts. EPA pointed to the power industry’s decision to move forward with projects like HECA in the NSPS as evidence that the costs for CCS are reasonable, but as discussed in previous posts, many of the projects cited by EPA have faced repeated construction delays and significant cost-overruns totaling billions of dollars. In addition, CCS projects are energy-intensive, and depending on the location of the project, could require the construction of pipelines that add to the overall environmental impact of a power plant project.
HECA is not the only CCS project EPA points to in the proposed NSPS as evidence that CCS is BSER, but the majority of the projects cited to have all faced significant hurdles. Some sources report that EPA has internally acknowledged that the agency should prepare a fallback position on BSER, especially in light of the lack of successful domestic CCS power plant projects. Potential fallback options include a determination that IGCC without CCS is BSER, but this would result in significantly less reductions in GHG emissions than could be achieved using CCS. Selection of a new control technology as BSER for the GHG NSPS would almost certainly require another round of notice and comment, which would result in the EPA having proposed this NSPS three times. In addition, delays in finalizing the NSPS would also impact EPA’s proposal for GHG emissions from existing power plants and push back the timeline for finalizing that rule.
Posted by Matthew Dobbins
at 03/06/2015 1:15 PM